Ellen Zimiles, managing director, head of global investigations at US firm Navigant, said governments will be handed an “unprecedented” amount of information when the deadline for foreign financial institutions (FFIs) in countries with a model 1 inter-governmental agreement (IGA) to provide information on all their US clients to their national tax office arrives on 30 June.
“The issue now is whether governments in these countries can handle all the information that has been given to them,” Zimiles said. “While the US will allow a grace period to give governments time, they will ultimately have to create a protocol for processing this data.”
Passed in 2010 by US president Barack Obama and introduced in July last year, FATCA requires FFIs from around the world to identify and report the financial details of all their American clients, whose tax duties still apply when they move either themselves or their money from the US.
Local litigation
Zimiles said another issue governments may face is litigation from its citizens who see the new reporting burdens placed on them as a result of FATCA as a breach of privacy.
Information a FFI must provide on US clients includes their name, their US taxpayer identification number, their address, their account number, and account balance or value.
She added that FATCA’s unprecedented nature may also throw up issues involving the preparation of staff involved in its implementation and administration.
“Nothing like FATCA has ever been implemented before and governments may find that they have not hired enough people, or that the people they have hired are not well enough prepared for the sheer volume of information and unpredictable consequences.”
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